national stability and well-being; how few political changes are worth purchasing by its sacrifice; how widely and seriously human happiness is affected by the downfall or the perturbation of national credit, or by excessive, injudicious, and unjust taxation. The condition of English finances on the accession of Pitt was very serious. The accounts of the war were still to a large degree unsettled. The enormous increase of debt during the war had been accompanied by a great diminution of commerce resulting from the colonial losses of England, while the finances had been allowed to fall into almost inextricable confusion. In the year ending January 1784, the permanent taxes, and the land and malt taxes, which were voted every year, produced together only about twelve and a half millions, which was nearly two millions less than was required for the annual services and for the interest of the funded debt. But in addition to this debt there was a large unfunded debt, the exact amount of which could not yet be ascertained, but which was certainly not less than fourteen millions, and these outstanding bills were circulated at a discount of fifteen or twenty per cent. The deficiency in the year was not less than three millions, and the public credit was so low that the three per cents more than twelve months after the peace were between 56 and 57, scarcely higher than in the most unfavourable period of the war, more than ten per cent. lower than immediately after the signature of the preliminary treaties.'

Most of the taxes fell greatly below the estimate, chiefly on account of the recent enormous increase of smuggling. A Committee of the House of Commons estimated the defalcation of the revenue produced by this cause alone at not less than two millions. Whole fleets—including vessels of three hundred tons burden-were employed in this trade; 40,000 persons on sea and land are said to have been engaged in it. It was pursued in many districts with scarcely a semblance of concealment, almost the whole population conniving or concurring in it, and there were complaints that agriculture was in some places seriously

Tomline's Life of Pitt, i. pp. 483, 484; Stanhope's Life of Pitt, p. 219; Macpherson's Annals of Commerce, iv. 52. George Rose states that the floating debt at the end of

the war was no less than 27,000,0007. exclusive of loyalists' debentures. Rose's Increase of the Revenue from 1792 to 1799, p. 9.

impeded by the constant employment of farmers' horses in carrying smuggled goods to a distance from the shore. Pitt computed that at least 13,000,000 pounds of tea were annually consumed in the kingdom, but duty was only paid on 5,500,000. Assuming, what was notoriously untrue, that the consumption of foreign wines was only equal to what it had been thirty-six years before, the revenue had in this single article been defrauded of 280,000l. a year.'

The abuses in the postal revenue were of another kind but equally glaring. In the beginning of the reign every member of both Houses had the right of franking as many letters as he pleased, by writing his name and the word 'free' on the covers, and he had also the right of receiving free, letters addressed to himself. These privileges were soon enormously abused. Covers of letters bearing the signature of members of Parliament were sent by hundreds in boxes over the kingdom, for distribution or for sale; the forgery of franks became the commonest of crimes; one member of Parliament is said to have received no less than 300l. a year from a great mercantile house for franking their correspondence, and as letters might be addressed without payment to members in places where they were not residing, numerous other persons were accustomed, by an easily concerted fraud, to receive their letters free under the name of a member. It was computed that the Government loss through the franking of letters was not less than 170,000l. a year. An Act had been passed in 1783 slightly restricting the privilege of franking, obliging the members to write the whole superscription of the letters they franked and making the forgery of franks highly penal, but it proved quite insufficient to suppress the frauds connected with the system."

The reports of a recent commission to inquire into the public accounts had shown that this department was honeycombed with abuses. Treasurers of the Navy had usually large sums in their hands which they were suffered to retain even when out of office, in some cases for no less than forty years. At the end of 1783, more than forty millions of public money which had

'Macpherson, iv. 49, 50. Tomline, ii. 170.

Adolphus, iv. 123, 124; Wrax

all, Posthumous Memoirs, i. 138-140; Ashton's Old Times, p. 122; Macpherson, iii. p. 400; 4 Geo. III. c. 21.

been issued for the public services were as yet unaccounted for. In 1785 there were four treasurers of the Navy and three paymasters of the Army besides those actually in office, whose accounts were still unsettled. The whole system of auditing accounts was little better than a farce. There were two officers, entitled 'Auditors of Imprest,' who were ostensibly charged with this function, and each had in some years of the war received as much as 16,000l., but their office had become a sinecure; its duties were wholly performed by clerks, who confined themselves to ascertaining that the accounts were rightly added, but without any attempt at a real investigation. Every kind of fraud and collusion could grow up under such a system, and there appears to have been also little or no check upon the fees, perquisites, and gratuities given to persons in official situations.'

The extreme multiplicity and complexity of duties opened an endless field of confusion and fraud. Created at different times and without any attempt at unity or consistency, they formed a maze in which only the most experienced officials could move. There were sixty-eight distinct branches of Customs duties. There were articles which were subject to no less than fourteen separate duties. Different sets of duties imposed on the same article had been appropriated by Parliament to payment of the interest on different branches of the National Debt. It was noticed by one of Pitt's best officials that so trifling an article as a pound of nutmegs paid, or ought to have paid, nine different duties.2 The amazing intricacy of this branch of the revenue made all preceding Chancellors of the Exchequer shrink from any attempt to revise or consolidate it, and it also formed a great field of patronage. When Pitt became Minister there were said to have been no less than 196 absolute sinecures connected with the Customs. They were offices granted by patent and in the gift of the First Lord of the Treasury, and their united income amounted to 42,0001.3

It is the supreme merit of the early years of the administration of Pitt that he carried order and light into this chaos, and

'Tomline, ii. pp. 28-33; Parl. Hist. XXV. 298-311.

Tomline, ii. pp. 235, 236. This statement is given on the authority of

George Rose.

Rose's Observations respecting the Public Expenditure and the Influence of the Crown, pp. 9, 10.

placed the finances of the country once more on a sound basis. It is impossible within the scope of a work like the present to give more than a general sketch of his financial reforms, and such a sketch can only do very partial justice to the industry, knowledge, and skill with which he manipulated a vast multitude of obscure and intricate details. His first object was to fund the unfunded debt and to put down the smuggling trade. The former object was gradually accomplished in 1784 and 1785. To attain the latter many measures were adopted. Some of them were entirely restrictive. An Act known as the 'Hovering Act' authorised the confiscation of a kind of vessel that was specially built for the smuggling trade, and of all vessels carrying tea, coffee, spirits, and any goods liable to forfeiture on importation, that were found at anchor or ' hovering' within four leagues of the coast, and an immense variety of regulations were made for preventing frauds in the process of distillation and for increasing the difficulties and dangers of the vast smuggling business which was carried on by vessels in the regular trade. At the same time, in the true spirit of Adam Smith, Pitt clearly recognised the fact that the extraordinary development of smuggling in any article is a proof that the duty on it is excessive, and he adopted on a large scale the policy of reducing and equalising duties, and diffusing the burden over a wide area. It was found by experience that the duty on tea gave rise to the most numerous frauds, and it had hitherto proved impossible to detect them. Pitt, reviving a policy which had been pursued by Pelham, reduced this duty from 119 to 12 per cent., and provided for the loss which the exchequer might possibly incur by largely increasing the duty on the windows of houses, which it was not possible to evade.3 The duty on British West India rum, which was another important article of the smuggling trade, was also greatly diminished," while the duties on wine were transferred from the Custom House to the excise, which was found the least expensive and the most effectual method of collecting them. This was the method which Walpole had endeavoured to introduce in 1733

1 24 Geo. III., sess. 2, c. 47. 26 Geo. III. c. 40.

See Dowell's Hist. of Taxation, ii. 183.

24 Geo. III., sess. 2, c. 38. 426 Geo. III. c. 73.

$ 26 Geo. III. c. 59.

and which he had been compelled by popular clamour to abandon, but Pitt carried it in 1786 with little difficulty. The abuses in franking letters were remedied by a measure which had been recommended in a report on the Post Office during Shelburne's administration, reducing the privilege to very moderate limits. It was provided that no member of Parliament could frank a letter unless he wrote, together with his name, the post town from which it was to be sent, the day of the month, and the year, and no member could receive freely letters addressed to him except at his actual place of residence.1

These measures were carried out with great caution. Though it was probable that the reduction of duties would soon be compensated by increased consumption and more regular payments, Pitt did not trust to this. It was his first principle in finance that a clear and considerable surplus must be created, and he courageously imposed a great mass of additional taxation in the form of duties on different articles. In the budget of 1784 new taxes were imposed which were estimated to produce 930,000l. In the budget of 1785 he imposed taxes to the amount of rather more than 400,0001.2 In the first years of his administration he imposed or increased, among other taxes, those on carriages and horses, on sport, plate, bricks, hats, and perfumery; he extended the system of trade licences; he increased the postage of letters and the taxes on newspapers and advertisements, and he introduced the probate and legacy duties. Frauds in the revenue were, at the same time, combated and greatly diminished by a complete reorganisation of the machinery of auditing accounts. One measure for better regulating the office of the Treasurer of his Majesty's Navy' provided that all sums issued by the exchequer for the service of the navy should be placed in the Bank to be withdrawn only as required, and that the treasurer should close his accounts every year. By another measure the Auditors of Imprest' were abolished, and a board of five commissioners was appointed with the largest and most stringent powers of auditing the public accounts of every department. By a third measure a similar body was appointed 124 Geo. III., sess. 2, c. 37.

Parl. Hist. xxiv. 1030, xxv. 556; Tomline, i. 502, ii. 39.